Customer Service in Airline Industry A Comparative Study of British Airways and Virgin Atlantic Airways
A MASTERS DISSERTATION
Customer Service in Airline Industry: A Comparative Study of British Airways and Virgin Atlantic Airways
Presented By:
Supervised By:
July, 2013.
CHAPTER 1: INTRODUCTION
Background
Customer service is one of the key determinants of the performance of any company, and thus it is very important for any airline company to provide their customers with service quality. The airline industry has in the last 25 years, been growing rapidly in combination with technological developments, thus making its role in supporting global trade more important (Sim, Song and Lillough, 2010). However, with the drastically changing business environments across borders, so are the travelling conditions through the airlines which have become the backbone of global business. These conditions have created an urgent need for airlines to remain continuously innovate and creative in terms of both services as well as the technologies used in the delivery of those services and better safety to the consumers (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008). Inline with airlines’ efforts to continuously innovate and create new customer services, the airline industry which in the past had been dominated by traditional airlines that provide full customer service is currently under consistent entry of the low-cost airlines that offer low fares as well as providing basic customer services compared to traditional airlines that provide additional customer services. However, significant variations exist between the full service airlines, a strategy that has been used by most of the rapidly growing airlines for strategic positioning in the global market. Thus, different airlines have varied customer service plans, which are differently perceived by consumers leading to variations in consumer preferences towards airlines (Solomon, 2010).
In the airline industry where the customers usually purchase services rather than products, it is highly important for such companies to ensure their customer service delivery is a notch higher compared to its competitors in order to remain competitive in the market. This implies that, as opposed to manufacturing companies that emphasize more on the product, airlines that are primarily concerned with service delivery focus more on the quality of their customer service (Steven et al. 2011). This is mainly because customer service is more important for airlines since they are involved in providing services instead of physical products. In fact, in most cases it is the quality of customer service which plays a significant role in winning and keeping customers. The need to make sure that good customer service is offered by airlines is due to the fact that, many of them are involved in providing essentially similar products making the role of differentiating between service products a difficult task. This is attributable to the fact that they have intangible qualities which makes it highly important to make sure that customers have a good experience through high quality customer service (Yee, Yeung and Cheng, 2010).
Thus, good customer service if effectively embraced by airlines it can lead to their strategic positioning in the marketplace which then helps in making them distinctive meaning it can further help consumers to make future purchasing decisions. In airline industry, customer service is referred to as the service that airlines provide to customers before, during and after the purchase and use of services (Solomon, 2010). An experience that meets the expectations of customers is only provided through good customer service. Thus, good customer service results to satisfied customers whereas bad customer service is often associated with generation of complaints from customers possibly resulting to lost sales, because unsatisfied consumers might in the future decide to purchase the service from a competitor. However, good customer service involves the development of bonds with customers, and in most cases this leads to long-term relationships between the customer and the airline (Yee, Yeung and Cheng, 2008). This is caused by the fact that good customer service creates advantages for both the airline companies and customers alike. The benefit to customers accrues from the fact that the airline is providing customer service that effectively meets their needs while the airline company benefits because satisfied customers as a result of good customer service are likely to come back even sometimes with friends. Moreover, satisfied customers will remain loyal with the airline company. However, good customer service is not achieved easily and it takes time to establish. In addition, significant investments are required in order to deliver consistent customer service standards (Selden, 2008).
British Airways is a UK based full service global airline that offers year-round low fares to its passengers. The airline also has an extensive global route network from where it flies to and from centrally-located airports across the globe. British Airways is the largest airline in UK and over the last two decades the number of passengers using British Airways has significantly increased even though towards the end of last decade this trend reversed probably because of the global economic crisis as show in the figures provided in Appendix 1 and 2. However, British Airways faces stiff competition from its main competitor Virgin Atlantic. Virgin Atlantic is a major British based airline, and it is undoubtedly the most significant success story. Since its inception in the year 1984, Virgin Atlantic has grown from its first leased jumbo to become the UK’s second largest long haul airline after British Airways.
The aim of this study is to investigate customer service at Virgin Atlantic and British Airways. Thus, it will involve conducting a comparative study of the customer service offered by both the Virgin Atlantic and British Airways in order to determine whether there is significant difference between the perceptions of customers towards customer service offered by these two airlines. It is undoubtedly important to conduct a research in the service quality area mainly because the two airlines are the frontrunners in the UK’s airline industry. Thus, it is important to know the extent of service quality and customer satisfaction since these two factors are often attributed to better performance in the service industry as a whole. However, British Airways and Virgin Atlantic were chosen because both are UK based hence operating within the same country and environment making their comparative study easy. In addition, they are main competitors in the UK’s airline industry.
Problem Statement
The nature of airlines business ensures that they are almost involved in providing services in entirety. However, services are different from products because their qualities are intangible meaning their quality can not be physically evaluated like products, but the overall customer service is usually evaluated through the customer experience which determines whether the customer will return in future. Therefore, the need to implement a mechanism for continuous evaluation of an airline’s customer service is inevitable. Thus, this comparative study to determine the customer service at Virgin Atlantic and British Airways is highly important in order to known the perception of customers towards customer service at both airlines as well as determining whether customer service between the two airlines is significantly different. Moreover, it is also believed that the quality of customer service has significant influence on customer satisfaction meaning the study will also seek to evaluate customers of both British Airways and Virgin Atlantic. However, it is also important to ensure the performance of both airlines is evaluated based on customer satisfaction. This would play an important role in helping the two airlines to succinctly know the perceptions of customers towards their respective customer service through the obtained feedback. Thus, it will also ensure that the current loopholes in customer service between the two airlines are urgently addressed for continued customer loyalty and market competitiveness.
Research questions
Is there a disparity between the quality of customer service offered by British Airways and Virgin Atlantic?
Are the customers satisfied with the quality of services offered by British Airways and Virgin Atlantic?
How does customer service quality influence consumer behaviour among the customers of British Airways and Virgin Atlantic?
Is there a disparity between the performance of British Airways and Virgin Atlantic?
Which airline between British Airways and Virgin Atlantic is more preferred by customers in UK?
Research Objectives
This study has several objectives which are the motives behind conducting the study, and they include: (1) to investigate customer service at Virgin Atlantic and British Airways; (2) to evaluate customer perceptions towards customer service offered by both the Virgin Atlantic and British Airways; and (3) to determine whether there is significant difference between the perceptions of customers towards customer service offered by both the Virgin Atlantic and British Airways.
Organisation of the study
The dissertation is organised into six chapters and each of the chapter discusses a particular topic. For instance, the first chapter is the introductory chapter which will introduce the topic as well as outlining the problem statement, research objectives and organisation of the study. The second chapter is the literature review and it will involve a review of diverse sources of information concerning the study topic in order to gain insights into its theoretical background. The third chapter is the research methodology which is concerned with the outline to the research approach as well as methods of data collection and analysis. This is followed by the fourth and fifth chapters which are the presentation of findings and discussion of the findings respectively. Finally, the last chapter is the conclusion which involves summary of key findings, highlighting of what is learned from the study as well as recommendations.
CHAPTER 2: LITERATURE REVIEW
Theoretical background
Many studies in the past have identified the importance of relationship between an airlines service quality, behavioural intention and the customer satisfaction. These studies have explored the importance of customer service in airline industry as well as the relationship between customer service and customer satisfaction and suggested that the behavioural responses by customers usually play a significant role in an airline’s customer service quality, behavioural intention of the customers as well as the customer satisfaction Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Yee, Yeung and Cheng, 2008). Thus, in simple terms the behavioural intention is anticipated as customer service quality behavioural consequences and it also affects the actual behaviour of the customers which in turn affects the performance of an airliner (Selden, 2008).
Yee, Yeung and Cheng (2010) explained in their research that differences in levels of customer service quality lead to different impacts. For instance, an airline company that offers superior customer service is likely to encourage the favourable behaviours of customers while at the same time reducing the probability of unfavourable behaviour of customers. This implies that it is essential for airlines to determine the different levels of their customer service quality target in order to achieve the desired impact on customer behaviours. Furthermore, an in-depth consideration of other studies also supports the conclusion that there is dependency between the behaviour consequences and the service quality meaning an increase in one variable encourages an increase in the other variable (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008). Moreover, several studies also points out that the quality of customer service is more conceptual than customer’s behaviour consequences. This is attributable to the fact that the customers’ behaviour consequences is a reflection of the feelings or perceptions of customers about various encounters and experiences with airlines that offer travel services (Sajtos, Brodie and Whittome, 2010).
Customer service quality in airline industry is the extent to which consumer expectations are met by the services provided by airline (Windle and Dresner, 2008). Providing superior customer service is the most important factor which can give an airline a unique position in the marketplace among competitors (Steven et al. 2011). Sim, Song and Lillough (2010) stated that companies have to mainly focus on the quality of customer service because low quality customer service can make customers disloyal, unhappy and eventually it would lead to the company decline. Thus, customer service quality is an important factor for airlines that significantly influence passengers in making decisions on which airline to travel with (Anderson, Fornell and Rust, 2009).
Several researches have also pointed out that the passengers or customers rate the intangible dimension of SERVQUAL model as the most significant dimension of service quality among airlines (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Yee, Yeung and Cheng, 2008). Moreover, some of the research findings are indicative of the fact that there are varying extents of customer service quality in different regions of the world (Anderson, Fornell and Rust, 2009; Steven et al. 2011). Overall most of the studies that regard to the impact of customer service quality on customers’ behavioural consequences conclude that there is need for service provider organizations to focus their efforts and try to manage the expectations of their customers up rather than down for the purpose of enhancing their services’ perceptions among the customers. This is not an exception for airlines which are primarily involved in providing travel and transportation services. Superior customer service leads to customer loyalty which is the degree to which customers are involved in recommending and expressing a preference for future use (Solomon, 2010). This is attributable to the fact that a satisfied customer from services provided by an airline, he/she appreciates and admires the level of customer service quality meaning that such customers will come again in the future thereby increasing the sales volume of that airline (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010).
Measurement of customer service quality and customer satisfaction
Most service delivery business know that they require feedback from customers on frequent basis in order to make sure that service delivery conforms with the needs and expectations of the customers. But too often, the customer perception and satisfaction measurement process is more complex and convoluted than it is usually needed to be (Arthur Andersen & Co., 2008). However, there is need to devise a more simple and effective approach that is simple to obtain customer feedback, without the need to overload the customer with too many questions. In particular, an effective process of measuring the quality of customer service and customer satisfaction in airline industry involves five basic steps that should subsequently follow each other (Bamber et al. 2009). The steps involved in measuring and managing customer satisfaction include: (1) knowing who your customers are; (2) understanding your customers’ needs (Dall and Bailine, 2008); (3) measuring your customer service performance; (4) focusing on priorities; and finally (5) improving your processes (Turban, 2009).
The relationship between customer service and customer satisfaction
The relationship between customer service and customer satisfaction has received considerable interest in the recent past among managers and scholars in the airline industry. For instance, in the Transportation and Logistics field, Steven et al. (2011) examined how customer service and customer satisfaction are linked using data from the airline industry. The findings of this study found that customer service at any airline is determined by three main measures such as ticket over-sales, mishandled baggage, and on-time performance, which showed a positive relationship with customer complaints, the measure that they used to determine customer satisfaction. This implies that a significant reduction in ticket over-sales and the mishandled baggage as well as increasing on-time flight performance, all contribute to a reduction in customer complaints. Therefore, most of the empirical work in the airline industry has assumed a linear relationship between customer service and customer satisfaction (e.g., Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010; Sim et al. 2010; Yee et al. 2010 and 2008).
Customer satisfaction and firm performance
Significant research has already been conducted to determine the relationship between customer satisfaction and firm performance and the findings are varied. For instance, a few studies have found no significant relationship (Anderson, Baggett and Widener, 2009), or even a negative relationship between customer satisfaction and firm performance (Hofer, Windle and Dresner, 2008), but the literature preponderance suggests that higher customer satisfaction leads to higher performance mostly due to lower price elasticity of demand or through lower marketing costs. Along these lines, it is evident that provision of superior customer service leads to high customer satisfaction which then cause positive impact on the future financial returns. This implies that customer satisfaction is essential in improving profitability because it influences the customers’ repurchase behaviour (e.g., Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010; Sim et al. 2010; Yee et al. 2010 and 2008). Thus, high customer service results to customer satisfaction eventually leading to customer loyalty, which in turn contributes to the company’s profitability (Anderson, Fornell and Rust, 2009). In addition, the willingness of satisfied customers to pay premium prices for services is guaranteed, thus also contributing to increased profitability (Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010; Sim et al. 2010; Yee et al. 2010 and 2008).
Perhaps the most relevant literature to this study is Anderson, Fornell and Rust, 2009; Sim et al. 2010; Yee et al. 2010 and 2008. Yee, Yeung and Cheng (2008), in addition to examining the impact of customer service on customer satisfaction, also looked at the impact of customer satisfaction on the financial performance of an airline, particularly profitability in the airline industry. The finding of these studies suggest that increased customer satisfaction through high quality customer service contributes to higher profits, even after controlling for the additional costs involved in the provision of that higher level of customer satisfaction through adoption of new and innovative service delivery technologies. Supplementing Anderson, Fornell and Rust (2009) and Yee, Yeung and Cheng (2008), incorporate a number of operating measures in the determination of how nonfinancial airline information, including customer satisfaction is linked to financial performance. Thus, using an instrumental variables approach, many studies have found that there is a positive link between customer service and customer satisfaction which improves the airline’s financial performance. Furthermore, in two airline industry studies, Yee, Yeung and Cheng (2008 and 2010) also find a significant positive relationship between customer satisfaction and firm performance.
While the studies cited above provide evidence for a positive relationship between customer satisfaction and firm performance, there has been very little consideration on how the competitive environment may influence the relationship between these two variables that are crucially important in airline industry. This is mainly because most of the work in this area has examined either the correlation between the market structure with customer service or customer satisfaction, or the direct influence of customer service or satisfaction on the airline profitability. Creel and Farell (2001), for instance, investigated route-level concentration in the airline industry after deregulation and linked it to on-time performance of individual airline companies. The study findings indicate that there is significant on financial performance of an airline as a result of superior customer service leading to improved customer satisfaction (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010).
In this study, we argue that the impact of customer satisfaction on firm performance as measured by profitability depends on the customer service offered by respective airline firm in the marketplace. In particular, in less competitive markets, the link will be weak since firms operating in these markets may be able to operate profitably even if they provide low levels of customer satisfaction. Along these lines, it is evidently true that the level of customer satisfaction significantly affects airline firms’ financial performance in the airline industry (Anderson, Fornell and Rust, 2009; Hofer, Windle and Dresner, 2008; Sajtos, Brodie and Whittome, 2010; Sim et al. 2010; Yee et al. 2010 and 2008).
A model to evaluate customer service: Hierarchical model
In 2001 Brady and Cronin, suggested a new model that combined several other models in addition to improving SERVQUAL model in a model there referred to as the hierarchical model. In this model the authors specified what needed to be reliable, responsive, empathic, assured and tangible by adopting a service quality perception based on evaluation by customer in three dimensions: 1) Interaction Quality (i.e., functional quality); 2) Physical Environment Quality; 3) Outcome Quality (i.e., technical quality). This model takes into account the three primary level dimensions of service quality in its conceptualization such as interaction, environment and outcome. In addition, each of these dimensions has three sub dimensions as follows: Interaction Quality (Attitude, Behaviour and Expertise), Environment Quality (Ambient Conditions, Design, and Social Factors), and Outcome Quality (Waiting Time, Tangibles and Valence). Thus, this hierarchical model incorporates the factors/variables of the SERVQUAL model into sub dimensions in order to improve the service quality framework through appropriate definition of service quality perception and providing an effective and clear form of service quality measurement.
In addition, the framework shows the customer experience at various dimensions and different levels of service as shown in Figure 4 below. This model is widely used because it enables firms to recognize problems in primary stage of service delivery by incorporating three essential dimensions such as the interaction, physical environment and outcome. Moreover, this model shows a better understanding about customer perception of service quality until today and if effectively adopted in a research it can lead to better recommendations.
Figure 1: The Hierarchical model by Brady & Cronin (2001)
Hypothesis
On the basis of the literature discussed above, it can be hypothesised that customer service is very essential in customer satisfaction and eventual performance. Thus, it is proposed that customer service at Virgin Atlantic and British Airways, and customer perceptions towards customer service offered by both the Virgin Atlantic and British Airways are distinct; as well as there is significant difference between the perceptions among customers towards customer service offered by both the Virgin Atlantic and British Airways. Therefore, the research hypotheses are as follows:
H1: There is a relationship between the quality of customer service and customer satisfaction.
H2: The higher the quality of services offered, the higher the customer satisfaction.
H3: There is significant relationship between the performance of an airline and customer satisfaction among the customers of British Airways and Virgin Atlantic.
H4: The higher the environment quality, higher the customer satisfaction among the customers of British Airways and Virgin Atlantic.
H5: The higher the output quality, higher the customer satisfaction among the customers of British Airways and Virgin Atlantic.
CHAPTER 3: RESEARCH METHODOLOGY
Chapter 3: Research Methodology
3.1. Introduction
This chapter presents the methodology adopted in this study. The chapter includes seven sections. Starting with the introduction which indicates the basic structure of the chapter, then in the second part introduces the general procedure of designing, followed by methods that have been adopted in this research as well as delving into more details of the questionnaire design. The next section involves a discussion of the selection of the sample of the study. The fifth section shows the procedure of data collection and analysis in the study and then the following section discusses the validity and reliability of the research methods chosen.
3.2. Research design
Considering the aim of this study that is to identify how customer service quality of British Airlines and Virgin Atlantic influences customer satisfaction and performance, the sample was drawn from passengers who use two airport terminals in London, UK. The research was designed to ensure that both quantitative and qualitative data were collected. For quantitative data, the questionnaires were designed to collect, which ensures data can be subjected to parametric statistical analysis as compared to the qualitative data which is non-parametrically analysed (Booth, Columb and Williams, 2003). Quantitative data is the one which is measured and quantified in a certain way whereas the qualitative is more complex compared to quantitative data, this is because it is more related to theory and thus is sometimes more difficult to analyse and interpret (Sapsford and Jupp, 2006).
Comparatively speaking, the survey design was elementary mainly because in comparison with others such as correlation it proves to be more superior and effective in the credible collection of data (Krathwohl, 1988). However, both primary and secondary data were collected in this study whereby it combined collection of data from the research respondents meanwhile the supplementing data from secondary sources such as books, journal articles and online resources. A combination of these two types of data greatly improve the credibility of the results obtained (Paltridge and Starfield, 2007; Babbie, 2010).
3.3. Research Methods
The research involved collection of both quantitative and qualitative data. The quantitative data were collected using a questionnaire survey. In addition, the questionnaires were administered to the randomly chosen respondents from 2 selected airport terminals. The participants were given a duration of approximately 15 minutes to answer the questions, after which the questionnaires were collected for analysis. Furthermore, the interviewer was not required to influence the respondents’ answers, thus they will be required to answer the questionnaires independently. In this research 200 respondents were interviewed
3.4. Sample Selection
The participants of this research were drawn from 2 randomly selected airport terminals in London, UK. This involved interviewing a total of 200 participants (100 from each airport terminal) who were randomly picked. The research sample purely consisted of travellers who had booked British Airlines and Virgin Atlantic air tickets. Male and female respondents, aged of 18-70 were involved in the survey. This age bracket was preferred because anyone above 18 years of age is an independent minded adult. These are people who shape opinions.
3.5 Data collection and analysis
For the purpose of this study, both primary and secondary data were collected since it involved the collection of raw data and reviews of the previously conducted researches on this field (Booth, Columb and Williams, 2003; Krathwohl, 1988). During the research, two types of data collected are: quantitative and qualitative data.
In this study the survey involved using self-administered questionnaires with both open-ended and closed-ended questions. This approach allowed collection of both qualitative and quantitative data. Moreover, the questionnaire was divided into four major sections where the first section intends to gather background information of the respondents; while the other three sections aim to collect data on respondents’ perceptions and attitudes of customer service and customer satisfaction. Structured questionnaires were adopted in this research in order to understand people’s (from all walks of life) perceptions and attitudes toward the two airlines considered in this study (Booth, Columb and Williams, 2003). All analysis will be based on the collected data from the questionnaires. Therefore, in order to succinctly answer the research question and test the research hypotheses SPSS software was adopted to conduct the analysis of collected data (Rea and Parker, 1992).
3.6. Validity and Reliability
The validity and reliability of the research methods adopted in a study need to be determined prior where it begins, which means questionnaire would be tested for validity and reliability first. This is due to the fact that questionnaires are essential in helping to gather information on opinions, attitudes, behaviours, knowledge, facts, as well as other information necessary for any particular research topic (Bryman and Bell, 2003; Fisher, 2007). Therefore, developing a questionnaire that is valid and reliable is effective to reducing tremendous measurement error. However, developing questionnaire validity and reliability involved taking several steps and each of which took a considerable time, the test was still necessary mainly because validity and reliability are fundamental before collecting primary data in this study (Neumann, 2000; Swailes, 2001; Flick, 2002).
Validity is regarded as the amount of built-in or systematic error in measurement. The validity of the questionnaire was established using a field test and the study supervisors, and it was dependent on the study objectives. Moreover, in order to ensure that the questionnaire used in the study was valid certain questions had to be addressed such as whether it measured the intended aspect of measurement; if it was comprehensive enough to allow collection of all the need information to address the goals and purpose of the study; if it is appropriate for the population or sample, and whether it is an actual representative of a questionnaire (Neumann, 2000; Swailes, 2001). The validity of the questionnaire was done by addressing the above questions in addition to carrying out a readability test. These steps were followed by conducting a field test using the draft questionnaire on subjects not included in the study’s sample population. The necessary changes were made in an appropriate manner, on the basis of both the supervisors’ opinion and a field test.
After the validity of the questionnaire was completed, reliability proving is the next step. Reliability is considered to be the random error in measurement (Bryman and Bell, 2003; Fisher, 2007). Therefore, es